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California Employment Law issue: Bonus Vs. Comission a legal definition?

  • I asked this once and got read the riot act about attendance but didn't get a true answer - stick to the laws at hand with answers please not opinions - I didn't define the attendance policy in my previous post as it's irrelevant - it's actually a very poor policy even my HR director sighed at but she doesn't know enough about commission laws in CA... California Employment Law issue: Bonus Vs. Commission a legal definition? The Scenario: Recently my wife was written up for attendance violations, she was utilizing her paid/accrued sick time to tend with either sick children or being sick herself. My wife’s position is a paid position, (an hourly wage, +commission) but when you are on a 90 day probation you “forfeit” your commission – while she did not hit commission last month, this month she did which is close to equal a week’s worth of pay for her. I’m not sure how much she forfeited in total, but some of the employees there are making $1-2K commission per month and with some of the new responsibility she has been given (while she has been on probation) she will be on par with them as well once she comes off. They also work on a scenario called occurrences when you are not on probation, the first event (calling in sick, being 7.01 min tardy) is a freebie, the second event you forfeit 50% of your commission and 3rd you lose it all. She also recently noted how many employees have been placed on probation in her department. Her probation came 2 weeks after her final offense. Now recently I read the statement of pay-scale for the company where they show the amount you need to achieve to get said commission is her monthly pay + 3x's overhead yet they call is a bonus, not a commission... She is in the field of collections - if her department makes quota they get a set bonus, yet above and beyond their personal quotas I believe they truly receive "Commission" not a bonus - my understanding is Commission is earned, bonus is received meaning commission is included in income and bonus is at the companies will... I'd love to learn a true definition and figure out if there is a leg to stand on here... Thanks!!! JAB I guess now my question is 2 fold – (1) Where an employee is hourly + is it legal to withhold commission as a disciplinary action? (2) Is passing your quota and getting paid based on a sliding scale once passed commission or bonus? I greatly appreciate your time in reviewing this matter…

  • Answer:

    Actually, if you re-read those answers. I did provide you with the definition of bonus and commission. Again, if your wife showed up for work, she would recieve the commission payment. She didn't so she didn't not meet the plan requirements which she clearly knew.

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Below are the definitions of bonus vs commission according to the Division of Labor Standards Enforcement (CA Department of Labor). Based on your description, I believe that your wife should contact the DLSE and ask some questions. Regardless of what an employer calls it, CA has very specific rules regarding "docking" of pay. If the bonus program is designed in such a way that performance "X" will result in "Y" pay, this is defined as wages. In CA, wages earned can not be deducted or otherwise forfeit. Hope this helps. Good Luck! Definitions of bonus and commission: "To qualify as commission wages, the employee must be involved in selling a product or service and the commission earnings must be a percentage of the price of the service or product sold. (Labor Code § 204.1; Keys Motors, Inc., v. DLSE (1988) 197 Cal.App 3d 557)" "In general, once commissions have been earned they cannot be forfeited. (Dana Perfumes v. Mullica (9th Cir. 1959 268 F.2d 936)" "A bonus is performance-based compensation to be paid to an employee in addition to the employee's regular salary. (Duffy Brothers v. Bing & Bing (1939) 217 App.Div. 10, 215, N.Y.S. 755)"

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